Rajasthan's pension outgo has risen faster than other states, UTs: RBI data

Revised estimate on Rajasthan govt's fiscal deficit is seen to have worsened to 6.12% of GSDP in 2020-21, according to a note from Delhi-based PRS Legislative Research

The amount of money Rajasthan allocated to pensions has risen faster than other states and Union territories.

The figure for the financial year 2020-21 (FY21) is 4.5 times what it was in FY11. The total for all states and union territories has risen by a multiple of 3.6 in the same period, shows an analysis of Reserve Bank of India data. Rajasthan recently announced that it would move back to a defined benefit scheme reversing the trend towards defined contribution pension schemes. A report suggested that this may be driven by fiscal pressures.

The revised estimate on Rajasthan government’s fiscal deficit is seen to have worsened to 6.12 per cent of gross state domestic product (GSDP) in 2020-21, according to a note from Delhi-based PRS Legislative Research. It was seen to be 2.99 per cent of GSDP at budget time. It was 3.77 per cent of GSDP in 2019-20. The fiscal deficit is the difference between how the much the government spends and its income. The difference is given as a percentage of the size of the economy denoted by GSDP.

Fiscal constraints on Rajasthan are partly driven by payments that it cannot cut back on. For example, pension payments already account for 24.2 per cent of its own tax and non-tax revenues for FY21 (budget estimate). The figure is lower for all states and union territories (see chart 1).

Pensions aren’t the only woes.

The state also has to make significant interest payments every year. The amount that is spent on interest accounts for 26.4 per cent of its own tax and non-tax revenues. The equivalent figure for all states and union territories is 22 per cent.

Thus, more than half of the tax and non-tax revenues go towards meeting pension and interest payments. The share increases even further if one also considers salaries.

“Committed expenditure of a state typically includes expenditure on payment of salaries, pensions, and interest.  A larger proportion of budget allocated for committed expenditure items limits the state’s flexibility to decide on other expenditure priorities such as capital outlay….In 2021-22, Rajasthan is estimated to spend Rs 1,14,126 crore on committed expenditure, an annual increase of 10% over 2019-20.  This is 62% of the state’s estimated revenue receipts for 2021-22,” according to PRS.

The fiscal deficit for Rajasthan is estimated to be 3.98 per cent of GSDP in 2021-22.

The state expects its own tax revenue to grow by 23 per cent in 2021-22 compared to 2019-20.